India and the European Union are expected to begin negotiations for a broad-based bilateral trade and investment agreement next month.
The bilateral agreement, India’s first with a developed region or country, may require the country to reduce its import tariffs, according to trade analysts.
Though India has succeeded in ensuring that issues such as environment and labour are not part of the trade pact negotiating mandate, the EU has said that ‘sustainable development’ will be a part of the larger strategic dialogue.
Commerce ministry officials said both sides would soon finalize the parameters of sustainable development.
“Usually, sustainable development is part of EU’s bilateral trade pact with any country. They have, however, made an exception in the case of India where it will be a bilateral issue but outside the purview of the trade pact. There is no clarity at present on what all will get included under sustainable development. Both sides will sit down and discuss this,” an official, who did not wish to be identified, said.
Some new EU member countries are pressing for inclusion of labour and environment as part of the bilateral trade pact, while India has been resisting the move on grounds that these could be used later as a non-tariff barrier to block India’s exports.
Officials said a high-level delegation was expected to visit Brussels in the second half of May to initiate discussions. They pointed out that though there were some sectoral deadlines to conclude the negotiations, there was no specific time frame to conclude the discussions for the bilateral trade pact within the next one or two years.
“Under Article 24 of the World Trade Organization, any agreement with a developed country requires the developing country to commit to tariff reductions within a shorter time frame and cover substantial trade (volumes). Hence, the impact of tariff reductions on domestic sectors would have to be analysed carefully,” an official said.
According to trade and WTO expert Biswajit Dhar, the European Union is expected to be more aggressive on pushing its interests in investment and intellectual property rights with India.
“Both India and the EU have defensive interests in agriculture and India has aggressive interests in industrial goods so these should not be areas of concern for India,” Dhar pointed out.
The EU had announced its intent to negotiate Free Trade Agreements with India, South Korea and Association of Southeast Asian Nations (Asean).
According to an analysis by the European Union, the agreements will boost the region’s exports to Asean by 24.2%, to India by 56.8% and to Korea by 47.8%.